Journals
Indonesian legal System
Overview of Legal System in Indonesian
The legal system primarily derived from Dutch civil law in the colonial era
It also integrates customary and Islamic law traditions and norms
The court system includes general, religious, military, administrative, and constitutional courts
The Supreme Court is the highest judicial institution overseeing the court system
Core principles are the rule of law, due process, the presumption of innocence
Law enforcement hindered by bureaucratic inefficiency and corruption
Basis of Legal Framework
Framework originates from Dutch civil law imposed during the colonial period
Influenced by customary rules and Islamic law for Muslim citizens
Commercial legal codes established governing business activities
Contract law principles allow parties the freedom to structure agreements
Intellectual property laws exist, but practical enforcement is feeble
Highly complex legal and regulatory framework across all levels of government
Court Structure
General courts adjudicate civil, criminal, and bankruptcy cases
Religious courts have authority over family, marriage, and inheritance disputes involving Muslims
Administrative courts resolve lawsuits regarding government agencies and tax issues
Military courts involve claims and disputes related to military personnel
Supreme Court sits atop the judicial system with oversight authority
Effective law enforcement is hindered by bureaucratic delays, case backlogs, and corruption
Key Legal Risks and Considerations
Highly complex regulatory framework across national, provincial, and local governmental levels
Overlapping or contradictory laws and regulations are commonplace
Business licensing and approvals are often lengthy, difficult, and costly processes
Intellectual property rights and laws exist, but practical enforcement is feeble
Commercial disputes are frequently settled out of court due to severe court delays
Corruption remains an endemic issue throughout legal institutions and society
Cultural Influences on Legal Systems
Contract Perspectives
Contracts influenced by relational trust.
Emphasis on ongoing relationships over legal obligations.
Harmony and Community
"Gotong royong" influences dispute resolution.
Communal resolution over adversarial confrontation.
Impact of the Constitution on Business Law
Constitution Overview
Shapes fundamental legal principles for business.
Business Law Implications
Guarantees rights impacting business (e.g., property rights, economic principles).
Regulatory Framework
Governs foreign investment and business operations.
Key Pieces of Legislation Impacting International Companies
Omnibus Law (Law No. 11 of 2020): Significant regulatory changes in technology and telecommunication sectors.
Government Regulation No. 46 of 2021: Targets foreign entities conducting business via the Internet.
Presidential Regulation No. 10 of 2021 (Priority List): Liberalizes business lines for foreign investment.
E-commerce and Private Electronic System Operator Regulations: Requirements for offshore e-commerce operators.
Regulation on Offshore Business Entities: Targets offshore companies for tax, data privacy, and customer services.
Key Rules Surrounding Contracts in Indonesia
Language Law (Law Number 24 of 2009): Contracts must be drafted in Bahasa Indonesia.
Bilingual Contract Requirement: Advised to prepare contracts in both Bahasa Indonesia and a foreign language.
What is intellectual property (IP)?
A company, business, or individual may own a wide variety of intangible assets collectively referred to as intellectual property. These assets can provide numerous advantages to a corporation and are essential for protection from competition. Various forms of intellectual property exist that can be legally protected to prevent illegal or unauthorised use.
Intellectual Property Protection in Indonesia
Copyright Protection: Covers original works of authorship without the need for registration.
Patents: Covers inventions, utility models, and industrial designs, with registration required for protection up to 20 years.
Enforcement: Strengthened efforts through specialized courts, increased cooperation with law enforcement agencies.
International Agreements: Indonesia is a member of WIPO, WTO, and TRIPS.
Trademarks: Protects trademarks, service marks, and geographical indications for 10 years, renewable.
Employment Law in Indonesia Differs From Other Countries in Several Ways
Indonesia has a minimum wage for each province, city, and regency. Region-specific minimum wages are updated annually.
Labor Law
The Labour Law (Law No. 13 of 2003) governs employment in Indonesia. Employers and employees have rights and responsibilities under this law.
Employment Contracts
Fixed-term or indefinite employment contracts are available in Indonesia. Projects and temporary jobs usually have fixed-term contracts, while permanent roles usually have indefinite contracts.
Minimum Wage
Indonesians work 40 hours a week, usually over five days. Work overtime can be paid according to the job contract or current rules.
Working Hours
Employment Law in Indonesia Differs From Other Countries in Several ways.
In Indonesia, hiring foreigners requires work permits and visas. Compliance with immigration laws and Indonesian company sponsorship are required.
Types of Leave
Indonesian employment legislation allows yearly, maternity, marriage, funeral, and sick leave. Labour regulations set leave days and entitlements for each category.
Termination and Severance
Employment of Foreign Nationals
The Indonesian labour legislation allows employer-union collective bargaining. Worker unions can negotiate salaries, working conditions, and other employment issues.
Collective Bargaining
In Indonesia, termination of employment must follow Labour Law procedures. Employees might be fired for poor performance, misconduct, or redundancy. Severance pay is usually required for long-term employees.
Key Legal Risks When Doing Business With Indonesia
Regulatory Environment
Complex Legal Framework: Indonesia has a multi-layered legal system influenced by Dutch civil law, customary law, and Islamic law in some regions, which can complicate business operations.
Changing Regulations: The Indonesian government frequently revises laws and regulations, which can affect foreign businesses.
Key Legal Risks When Doing Business With Indonesia
Contract Law
Contractual Ambiguities: Differences in legal interpretation can lead to disputes. Contracts need to be clear, detailed, and specifically tailored to Indonesian law.
Enforcement of Contracts: Enforcing contracts through the Indonesian court system can be slow and unpredictable.
References
Crouch, M. (2022). Constitutional Democracy in Indonesia. Oxford University Press.
Mahaputra, M. R., & Saputra, F. (2021). Application of Business Ethics and Business Law on Economic Democracy that Impacts Business Sustainability. Journal of Law, Politic and Humanities, 1(3), 115–125. https://www.dinastires.org/JLPH/article/view/56
Muryanto, Y. T., Kharisma, D. B., & Ciptorukmi Nugraheni, A. S. (2021). Prospects and challenges of Islamic fintech in Indonesia: a legal viewpoint. International Journal of Law and Management, 64(2), 239–252. https://doi.org/10.1108/ijlma-07-2021-0162
Butt, S., & Lindsey, T. (2018). The Judicial System. In Oxford University Press eBooks. Oxford Academic Publish journals with us. https://doi.org/10.1093/oso/9780199677740.003.0004
Hamzah, H., Narang, A., & Yusari, A. (2021). EliScholar -A Digital Platform for Scholarly Publishing at Yale EliScholar -A Digital Platform for Scholarly Publishing at Yale YPFS Documents (Series 1) Browse by Media Type Legal systems in Indonesia: overview Legal systems in Indonesia: overview. https://elischolar.library.yale.edu/cgi/viewcontent.cgi?article=12599&context=ypfs-documents
Wardhani, L. T. A. L., Noho, M. D. H., & Natalis, A. (2022). The adoption of various legal systems in Indonesia: an effort to initiate the prismatic Mixed Legal Systems. Cogent Social Sciences, 8(1). https://doi.org/10.1080/23311886.2022.2104710
References
Global Compliance News. (n.d.). Indonesia: Building Up Regulations to Support Digital Economy. Retrieved December 5, 2023, from https://www.globalcompliancenews.com
UK P&I Club. (n.d.). Contracts in Indonesia. Retrieved December 5, 2023, from https://www.ukpandi.com
HKTDC Research. (2018, January 9). Intellectual Property Protection in Indonesia. https://research.hktdc.com/en/article/MzUzNTYzMzE4
Oliver, W. (2019). Indonesia - Justice. In Encyclopædia Britannica. https://www.britannica.com/place/Indonesia/Justice
Wardhani, L. T. A. L., Noho, M. D. H., & Natalis, A. (2022). The adoption of various legal systems in Indonesia: an effort to initiate the prismatic Mixed Legal Systems. Cogent Social Sciences, 8(1). https://doi.org/10.1080/23311886.2022.2104710
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